GST Memorandum 300-7 "Value of Supply" under "Non-Arm's Length Supplies"

General synopsis

21. Section 155 of the Act provides that where a supply of property or a service is made, between persons not dealing with each other at arm's length for consideration that is less than the fair market value of the property or service at the time the supply is made or for no consideration and the recipient of the supply is not a registrant who is acquiring the property or service for consumption, use or supply exclusively in the course of commercial activities, then:

(a) if no consideration is paid for the supply, the supply is deemed to be made for consideration, equal to the fair market value of the property or service at that time; and

(b) if consideration is paid for the supply, the value of the consideration is deemed to be equal to the fair market value of the property or service at that time.

22. The above rule does not apply where the recipient of the supply is a registrant who is acquiring the property or service for use, consumption, or supply exclusively in the course of the registrant's commercial activities.

Applies where single consideration shown/relative FMV may be used

Combined Consideration

12. Pursuant to subsection 153(2), where consideration is paid for a supply and other consideration is paid for one or more other supplies or matters (either in the form of a single amount on an invoice or separate amounts on an invoice), and the consideration for one of the supplies or matters exceeds the consideration that would be reasonable if the other supply or matter were not provided, the following rule applies:

the consideration for each of the supplies and matters is deemed to be that part of the total of all amounts, each of which is consideration for one of those supplies or matters, that may reasonably be attributed to each of those supplies and matters.

13. The attribution may be based on a ratio established by the fair market value of the supplies and matters.